The Dow Jones Industrial Average increased 2.9% to 47,909.9, the highest close since March 5, while the Nasdaq Composite jumped 2.8% to 22,635, its best finish since March 11.
The S&P 500 advanced 2.5% to 6,782.8, marking the highest closing level since March 9.
Barring energy's 3.7% decline, all sectors ended in the green, led by industrials' 3.8% advance.
West Texas Intermediate crude oil was last down nearly 15% at $96.44 a barrel, while Brent futures tumbled about 12% to $96.40 -- though both benchmarks remained well above pre-conflict levels.
US President Donald Trump, who had set an 8 pm ET, Tuesday, deadline for Tehran to fully reopen the Strait of Hormuz, agreed to suspend planned attacks on Iran for two weeks upon Pakistan's request. Tehran said it would allow "safe passage" through the key trading route, subject to coordination with Iranian authorities.
However, reports about ceasefire violations signified the possible fragile nature of the pact.
Iran's parliamentary speaker, Mohammad Bagher Ghalibaf, accused the US of violating the ceasefire agreement.
The White House said Iran assured that ships are transiting the Strait of Hormuz, despite reports that Tehran had again closed the waterway because of Israel's attacks on Lebanon, CNN reported.
Separately, Kuwait and the United Arab Emirates reportedly said they were targeted with Iranian drones and missiles.
"The headlines may calm down first, but the real reset depends on what happens in the days ahead," Charu Chanana, chief investment strategist at Saxo Bank, said in a report.
US Treasury yields were down, with the 10-year rate falling 5 basis points at 4.3% and the two-year rate dropping 4.1 basis points at 3.79%.
Minutes from the Federal Reserve's March meeting showed that participants emphasized the need for the central bank to be "nimble" in adjusting monetary policy amid heightened macro risks.
"The vast majority of participants judged that upside risks to inflation and downside risks to employment were elevated, and the majority of participants noted that these risks had increased with developments in the Middle East," the minutes showed.
Most policymakers were concerned that a prolonged war could soften labor market conditions, possibly warranting policy easing, according to the minutes. However, persistent inflation amid higher oil prices could call for rate increases.
"The conflicting viewpoints point to a period of policy stability," Sal Guatieri, senior economist at BMO Capital Markets, said in a report. "The Fed is on hold until it has greater clarity on the direction of the Iran war and its effects on the economy and inflation."
Airline and cruise operator stocks jumped, with Carnival (CCL) up 11%, among the top gainers on the S&P 500. United Airlines (UAL) surged 7.8%. Southwest Airlines (LUV) and American Airlines (AAL) were also up, along with Norwegian Cruise Line (NCLH) and Royal Caribbean Cruises (RCL).
In company news, Meta Platforms (META) shares jumped 6.5% after the tech giant unveiled its Muse Spark artificial intelligence model.
Delta Air Lines (DAL) logged better-than-expected first-quarter results amid robust corporate and leisure demand. The air carrier's shares rose 3.8%.
Exxon Mobil (XOM) expects its global oil-equivalent output to take a hit in the first quarter due to production disruptions caused by the Middle East conflict. Shares of the US oil giant fell 4.7%, while smaller rival Chevron (CVX) slumped 4.3%, the steepest decline on the Dow.
Gold was last up 1.4% at $4,750.70 per troy ounce, while silver gained 3.4% to $74.44 per ounce.
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